Aussie Consumer Confidence Stumbles

In a reversal of fortune to the previous quarter (September 2010), Aussie confidence ended 2010 with a slight fall as consumers looked to curb expenditure in the wake of rising utility and food costs.

Fourth quarter (December 2010) results from Nielsen’s Global Online Consumer Survey show that the Australian consumer has slightly lost their confidence, as a conservative drop of three points takes the Consumer Confidence Index score to 112 points. But the latest score is still a good five points higher than the one recorded this time last year, and is still a positive result for Australia.

Of those consumers who had changed their spending to save on household expenses over the past year, a staggering 70 percent said they had actively taken action to reduce utility expenditure in this quarter. This was closely followed by consumers switching to cheaper grocery brands which recorded the greatest percentage point increase for this quarter (up 10% to 61%) as the second most popular action for reducing expenditure during the past year.

Cutting down or buying cheaper brands of alcohol also featured as a form of expenditure reduction, with 28 percent of consumers claiming to have taken this step in the past 12 months. And when economic conditions eventually improve, 62 percent said that they would continue to save on utility costs, with a further 41 percent maintaining
their brand switching momentum by choosing the cheaper grocery option.

“Consumers’ increasing propensity to switch to cheaper grocery and alcohol brands is reflected in the growing popularity of private label. Consumers now see this phenomenon as a credible and value for money alternative to the more traditional, well known name brands. Nielsen’s 2010 State of the Nation Report published in December stated that during the economic downturn, half of all Australian consumers said that they had purchased more private label products, and that 92 percent of them would continue to do so in an improving economy,” commented Chris Percy, Managing Director – Pacific, Nielsen Consumer Group.

The subsequent impact of private label brands on the total value of the grocery category has caused a noticeable decline in the category’s value growth. Heavy retailer
discounting through price reductions and deep promotions is also a leading contributor to the
decline in value growth.

“The flooding across the eastern seaboard of Australia will also have far reaching impacts. For some areas it will be about a disruption to consumer confidence, for others a retail dislocation, and for many parts of Australia, it will be about the reallocation of national infrastructure and resources –
with all the resulting changes for employment, wages and inflation,” Percy added.